The N.C. Beer and Wine Wholesalers Association Says Craft Brewers Can’t Handle Their Taxes, Shouldn’t Be Able to Distribute Their Own Beer

The groups are at odds over House Bill 500, legislation filed last month that, among other things, raises the limit on how many barrels of beer a brewery can self-distribute before it must go through a wholesaler to sell its beer.

The association sent out a memo Monday saying that, according to the Department of Revenue, 23 percent of the state's craft breweries are not in complete tax compliance. This means that 38 of 164 North Carolina breweries aren't filing and paying taxes as required. The wholesalers used that info as ammo in their effort to shoot down HB 500, basically saying brewers are incapable of paying or unwilling to pay their taxes.

"It makes no sense to expand self-distribution when nearly one-fourth of all brewers are out of compliance with their tax payments and reporting," said Tim Kent, executive director of the Wholesalers Association.

Currently, North Carolina breweries that sell fewer than twenty-five thousand barrels of beer per year can get their own wholesaler permit and distribute their own beer. Beyond that "barrel cap," breweries must go through an independent distributor, even if they want to sell their brews to a restaurant next door. HB 500 seeks to raise the annual cap to two hundred thousand barrels, meaning that far fewer breweries would need to go through a distributor. (For perspective, in 2014, all of North Carolina's craft breweries combined produced 372,473 barrels of beer.)

Critics of the current cap say it deters breweries from growing, cuts into their revenues, and traps them in distribution contracts that are near-impossible to break. (HB 500 would allow small breweries to break these agreements). The N.C. Craft Brewers Guild has said that HB 500 would bring North Carolina's laws up to speed with its booming craft beer industry.

HB 500 supporters have a tough opponent in the Wholesalers Association. The group gave $231,662 in political contributions to North Carolina candidates during the 2016 election cycle, according to the North Carolina Free Enterprise Foundation.